By Charles Hugh Smith
November 20, 2017
As long as this is business as usual, it’s impossible to slash costs and boost widespread prosperity.
| It’s easy to go down the wormhole of complexity when it comes to figuring out why our economy is stagnating for the bottom 80% of households. But it’s actually not that complicated: the primary driver of stagnation, decline of small business start-ups, etc. is costs are skyrocketing to the point of unaffordability. |
As I have pointed out many times, history is unambiguous regarding the economic foundations of widespread prosperity: the core ingredients are:
1. Low inflation, a.k.a. stable, sound money
2. Social mobility (a meritocracy that enables achievers and entrepreneurs to climb out of impoverished beginnings)
3. Relatively free trade in products, currencies, ideas and innovations
4. A state (government) that competently manages tax collection, maintains roadways and harbors, secures borders and trade routes, etc.
Simply put, When costs are cheap and trade is abundant, prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.
These foundations characterize stable economies with widely distributed prosperity across time and geography, from China’s Tang Dynasty to the Roman Republic to the Byzantine Empire to 19th century Great Britain.
The “Secret Sauce” of the Byzantine Empire: Stable Currency, Social Mobility(September 1, 2016)
The Lesson of Empires: Once Privilege Limits Social Mobility, Collapse Is Inevitable(April 18, 2016)
I have estimated the realistic cost of a conventional middle class lifestyle, and found that only the top 20% can afford a middle class lifestyle. Needless to say, this destroys the notion of being “middle.”
The squeeze on households comes from both the soaring cost of big-ticket items such as childcare and healthcare and from the stagnation of wages/income.
Why the Middle Class Is Doomed (April 17, 2012)
Priced Out of the Middle Class (June 28, 2012)
The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016)
Inflation Isn’t Evenly Distributed: The Protected Are Fine, the Unprotected Are Impoverished Debt-Serfs (May 25, 2017)
The Disaster of Inflation–For the Bottom 95% (October 28, 2016)
About Those “Hedonic Adjustments” to Inflation: Ignoring the Systemic Decline in Quality, Utility, Durability and Service (October 11, 2017)
So your new TV cost $100 less but your healthcare costs $10,000 more: the big expenses are soaring, costing households tens of thousands of dollars more while cheap TVs and clothing decline a few bucks.
Labor’s share of the economy keeps stairstepping down: every boom/bubble benefits the financier and technocrat class, but labor’s share of the economic “boom” flatlines for a few years and then tanks in the inevitable unwinding/recession.
The third dynamic is the dominance of anti-competitive cartels and state guilds which are no longer accountable or competent. (The two are related, of course; when accountability is lost, there’s no way to identify or weed out graft and incompetence.)
This report on the causes of the decline of New York’s subway system reads like a summary of the entire U.S. economy: the politicization of public services, corruption that evades the legal definition of corruption, self-enriching guilds, cartels and elites and gross incompetence enabled by zero accountability.
How Politics and Bad Decisions Starved New York’s Subway (New York Times)
As long as this is business as usual, it’s impossible to slash costs and boost widespread prosperity.
“the dominance of anti-competitive cartels and state guilds which are no longer accountable or competent.”
” self-enriching guilds”
There is a long ethical train of thought about the difference between a guild and a profession. A guild keeps information secret so as to protect and enrich it’s members.
A profession is dedicated to sharing information and techniques freely for the benefit of all of society.
I took great pride to call dentistry my profession. And I watched over the decades, as the erosion of the medical profession revealed the self serving distortions of greedy institutions posing as a profession. I grouse a bit yet remain grateful for the skills and judgements of healers who attend to me in my times of need.
Thank you wip for demonstrating your ability to showcase journalistic professionalism.
edit. my mission statement was and remains “The most enduring factor in health care is informed choice” ….and stuff how by our expertise and knowledge aims to educate you as to your choices..
So now you are a fucking dentist?
Since 1974, and a few other things along the way that I found…. Try to keep up Magilitta.
WIP, this article is complete bullshit. It’s written to rhyme with an old saying, “prosperity is simple, low cost of living and abundant employment. Looks like CHS has become another shill on the take, another bought and sold peon. Imagine, replacing employment with trade. How quaint. Isn’t that exactly how we got where we are? If you are satisfied with the status quo, giddyup to Wal-Mart and get you some cheap Chinese junk.
“Simply put, When costs are cheap and trade is abundant, prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.” The guy is a lowlife for sure. His argument is straight from the clinton/bush/obongo NWO playbook. Thank God we have Trump. Thank God this bought and sold piece of shit is old and can’t keep shilling for Walmart much longer. WIP, I’m a big advocate of what was called broad money when I was in school. Abundant employment spread money far and wide through the population. And as long as cost-of-living was low, everybody did pretty good. This guy has completely bastardized that, substituting the god of free trade in place of employment. It’s worse than any honest argument could be, it’s a fucking lie and he knows it. I’ve read CHS for years, I’m very familiar with his approach. He didn’t have an epiphany and become an NWO scumbag on his own. It took some cash, guaranteed
I have to post more completely by including a link to the article and mentioning the author at the top.
This article is from Charles Hugh Smith’s site. His site is my second favorite.
This is really beginning to piss me off… I typed a whole thing here and the next thing I know? I’m back on the Charles Manson comment thread. Somehow this freaking laptop has a macro that takes me from the comment I am writing to a complete other story in the same tab space. That is one hell of a macro I managed to accidently record… I am thinking that has to be what happened OR I stumbled into a new dimension of time and space where I misplace entire thoughts.
What I typed, in a nutshell. I met a young man in college in the 90s who had grown up in St. Louis and was attending the University of Oklahoma on a wrestling scholarship. (who knew OU had a wrestling program?)
He mentioned in class one day that he’d grown up in the “apartments” aka tenement housing and he had it really good because both his parents (he had a father and a mother!) had good paying factory jobs. He said he believed as a child they were rich. Now, at age 22, about to graduate from college, he knew he’d grown up in poverty. And that ties in because the middle class is a term that means very different things to many people.
Labor has never held an exalted position as has come to be expected by the US “middle class”. Labor has always been a poor class. The middle class US lifestyle sprang up owing to the unique position of being the last man standing after WW2, and when the US was inevitably hit by competition starting in the 1970s, it turned to funding that lifestyle with debt, ever more rapidly. The middle class is dying and will not recover, but rather will continue to decline until equilibrium is reached.
It is simply not possible for the band of 25th to 75th percentile to live affluently. The production of much of that band will be insufficient to support such a lifesyle, and feeding off the productive as is currently happening will fail.
The bottom half of the middle class is simply not capable of deeply value adding, especially not in a tech economy. Those folks would generally possess below average intelligence and skills. That is not a recipe for affluence.
That was sort of the point I was driving toward on my meandering stroll through wordland.
The middle class is not a LIFESTYLE to which one becomes accustomed. It is the way the HIGHEST two thirds of the peasants live. If you think your position in the middle class has shifted, look around at who or what you believe is now where you should be and COVET.
Exactly. I’ve seen economic studies that estimate the US held 60% of the entire world’s capital stock in 1950. Imagine that!
I fear you’re correct that the US middle class halcyon days will never return. But the emergence of health care cartels and massive small-business regulation have accelerated the decline, which Smith and other have observed so well.
I’m sure we all agree that WWII artificially inflated the middle class. But what’s been happening to the middle class since its peak is nothing short of demonic. It’s like people are being harvested. Propagandized into eating diets that make them chronically sick. Deliberately being sickened to drive healthcare profits, then deliberately driving up the cost of health care. And not counting it as inflation? It is a massive racket involving literally millions of people who are profiting from it at the expense of hundreds of millions. Ok sure people have been taking advantage of other people for millenia to make money, but this is a whole new level.
The fact remains that massive inflation, unreported by government toadies, in education and health care costs has impoverished most of the Western population. This inflation has been 100% caused by government social engineering, preferences and spending on politically favored minorities, and itself. It will rapidly lead to collapse, as more and more useless mouths are invited into the US along with large numbers of relatives…And I haven’t even talked about pensions…
Sadly, Mr. Smith is wrong.
Communist China exhibited, at most, 2 of his 4 criteria.
They went from 6% of US GDP in 1984 to parity today, and continue to outgrow the US by a multiple.
Mr. Smith fails to address the real issue: the victimization (with the complicity of government) of the American population by special interests starting with the entire health care and health insurance system. Follow this with the more recent higher education scam, the legal sphere scams, the bankster scams – these are all a function of *gasp* government. Bad government in the American case.